Daniel Hernández
Director General
Queretaro Automotive Cluster
View from the Top

Queretaro: From Manufacturing to Mind-Facturing

By Alejandro Enríquez | Mon, 10/19/2020 - 09:49

Q: What was your approach toward the pandemic?

A: As a cluster, we defined our strategy in four stages: pre-pandemic, pausing operations, resuming operations and recovery. During the first stage, the automotive sector was affected by the pandemic effects that started to be felt across the world with supply shortage from Asia and Europe and technical suspensions. We started to create guidelines between cluster members to create a clearer picture. On March 18, when the country ceased economic activities, we walked our members through the legal procedures that needed to be completed. This situation was unprecedented and one of the lessons at this stage was mutual learning and trust to share best practices for everyone to take the best course of action when suspending operations to minimize the effect on production, employees and budget.

When the industry moved toward resuming operations, we started to analyze the situation by studying the best strategies implemented by some of the leading companies in other countries. As a cluster, we defined our own protocol to resume operations even before any government requirement. In April, through federal associations, we kept in touch with IMSS and the Ministry of Economy. By the time the government required companies to register their individual protocols, many of our members had already prepared them. By the first week of June, most companies had already resumed operations.

Today, we are in the recovery phase, a training stage in which we need to be prepared for future outbreaks when COVID-19 symptoms can be confused with common influenza. The sector has made all necessary efforts to prevent any contagions while creating working groups to not let their guard down. We are creating a best practice guideline for cluster members to follow.

When first implementing health measures, companies invested MX$630,000 (US$28,794) on average, depending on the size of their operations. To continue with the implementation, it cost them an average of MX$98,000 (US$4,479). Regarding production levels, companies are at between 98 and 100 percent of their capacity, some operating at up to 120 percent. Estimated figures place production levels between 75 and 80 percent of what was originally planned for 2020, which takes into account the months of suspensions. Now, our focus is on our upcoming B2B Automotive Meetings event to strengthen Tier 2 capabilities and help them look for new business opportunities.

Q: What strategies can strengthen Tier 2 companies that were left vulnerable because of the pandemic?

A: Stronger companies are those that have a solid financial structure to manage their cash flow, particularly amid the pandemic. To assure future endeavors, companies must bear in mind that the industrial sector gets financing through its value chain. Consequently, Tier 2 companies must be able to endure financing from Tier 1 companies in payment periods that range from 30 to 120 days.

It is hard to say how fast the recovery will be, particularly in Mexico, but China’s reactivation provides a positive outlook. However, across the world, several Tier 2 companies could not endure the pandemic and closed and now supply chains are sorting out this adverse effect. To achieve a solid financial structure, we need comprehensive policies to finance Tier 2 suppliers. Local governments have made an effort in this regard by providing credit to companies to recover part of their cash flow.

Once the financial element is solved, companies will need to retain their talent. When companies paused their operations, this was particularly important. All of them knew that they would eventually resume operations at a pace that could help them regain part of their lost production. They needed their talent for that. Companies could not afford to lose the valuable and skilled talent that they would need when operations resumed.

Q: How has the cluster advanced in developing tooling suppliers?

A: This aspect remains critical for the automotive supply chain, particularly now that USMCA and the international trade environment is opening up opportunities for new foreign investments in the country. The opportunities USMCA provides go hand by hand with the development of the sectors that support the automotive supply chain, such as tooling.

The sector should keep pushing in this direction. Some financial products launched by institutions like Bacomext, NAFIN and the Queretaro state government have helped to develop Mexican tooling companies. OEMs and Tier 1 companies have also opened opportunities exclusively to develop local tooling companies. The effort might have slowed down due to the pandemic but it will ramp up shortly, mostly to take greater advantage of USMCA.

Q: Queretaro is a preferred investment destination by global companies. Are there more investment plans at the door?

A: The scenario is favorable for continued growth. The pandemic did not change the state’s assets for incoming companies. Having said that, the market needs to generate trust, both at the federal and the global level. Some projects remain on hold but our infrastructure, including highways, research centers, airport and industrial parks, is ready. In mid-September, Queretaro’s governor announced new investments in the sector but those projects started years ago, not months. I am confident similar projects remain on hold and many are waiting until the end of the year to evaluate the recovery levels achieved by the sector. Those levels will be the starting point to calculate production demand.

The more companies understand the market, the faster investments will arrive. Some calculations by major market analysis firms forecast that 2019 levels will return in 2022, in the best-case scenario, or 2024, in the worst-case scenario. It is true that USMCA will trigger some opportunities due to the new rules of origin but other trust boosters are needed as well.

Q: What are your views regarding manual labor versus automation?

A: The pandemic demonstrated that even though it might be expensive to embrace automation, it might be costlier to not be prepared for a situation where manual labor is unattainable. If companies are looking for more efficient operations while avoiding contagion, digital tools become a feasible option.

One of our associates, Nitrex, was among the companies least affected by the pandemic. Why? Because almost all its processes followed industry 4.0 standards, so they needed only four operators on the production floor. Of course, the technology is expensive but measuring it by how the pandemic impacted production levels, it proved to be effective. This is the clearest example that losing the fear of technology is worth it, given the transformation the manufacturing sector is going through. 

Suppliers of technological solutions should also be aware of how flexible their solutions are and to recognize how they can best adapt their solutions to what the company actually needs. There are more and more technological suppliers that offer solutions in different price ranges. We just need to dig a little bit further and continue breaking paradigms.

Q: What role will Queretaro play in the automotive industry in the years to come?

A: We need to go from manufacturing to mind-facturing. Research and engineering centers working hand in hand with manufacturing companies is proof that we have developed unique technical capabilities to conduct product engineering. This should continue growing and the conditions are there to do so. We must acknowledge the role the state government has played in developing testing centers, equipment and investments, as well. The academic sector has also been hands on in developing local talent. Our task is to strengthen this ecosystem and keep it fertile.

Our vision as a cluster is also to advance a change of mindset when it comes to mobility and position Queretaro as an example of national innovation. There is a great deal to be done but it is our dream to challenge the concept of mobility.


Queretaro Automotive Cluster is a civil association that groups relevant members of the sector in the state, including government agencies, universities and the private sector. As of May 2020, the cluster had 97 members

Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst